Aircraft Registration Asset Protection Bank Accounts Company Administration Company Incorporation Film Administration & Co-production Inheritance Planning Intellectual Property Structures International Trade Structures Property Ownership Structures Royalties & Intellectual Property Tax Planning Tax Residency Certificates Trusts VAT/TVA Services Yacht Registration   Sophisticated answers for tax planning, asset protection & inheritance planning.           Name:      E-Mail:       Copyright  © 2008 ILS Group | Privacy Policy

Newsletter | Articles Directors’ Duties in the Isle of Man The directors, management and in-house companies of ILS Isle of Man (IOM) act as directors of many Isle of Man companies. Their duties are extensive as explained below: Directors’ fiduciary duties and duties of care skill and diligence are derived from common law and at many points overlap each other. Also, as the acceptable standard of conduct expected from directors’ changes over time the duties constantly evolve and develop. Directors should understand the nature and extent of the duties which they undertake as directors. It is the law which imposes duties on directors. If a director does not comply with his duties he may be liable to civil and/or criminal proceedings and may be disqualified from acting as a director. Directors of Isle of Man companies are subject to certain standards of care, skill and diligence in discharging their duties and owe three types of duty to their company: duties of loyalty and good faith – such duties are categorised as fiduciary duties duties of care, skill and diligence statutory duties Generally, fiduciary duties are undertaken by a director on behalf of the company and not the company’s shareholders, creditors or beneficial owners and it is the company which can enforce them. Here is a summary of the main fiduciary duties which directors undertake on behalf of the company: Duty to Act Bona Fide Directors must act bona fide in what they consider, and not what the court considers, to be in the interests of the company. This duty of honesty and good faith is arguably the primary fiduciary duty of a director and is a subjective one. It is not about whether a particular act or omission, viewed objectively by the court, was in the interests of the company, but whether the director honestly believed the act or omission was in the interests of the company. Duty to Act for a Proper Purpose Directors must exercise their powers for a proper purpose. This duty is an objective one. Even if a director has acted bona fide in what he believes to be in the interests of the company, if he has exercised his powers for an improper purpose he will still be in breach of his duties to the company. No Conflict of Duty and Interest Directors must not put themselves in a position where there is a conflict (actual or potential) between their personal interests and their duties to the company or between their duty to the company and a duty owed to another person. The rationale behind this rule is that a company is entitled to the collective wisdom of its directors. No Secret Profits A director must not make a secret profit for himself from the use of corporate assets, information or opportunities. Duty to Act Independently Directors must not agree to restrict their powers to exercise independent judgment and they must not fetter their discretion. This overlaps with the no conflict and bona fide rule – if a director is not acting independently he will probably not be acting in the best interests of the company and will be in a position of conflict. Directors Duties of Care, Diligence and Skill Directors owe a duty of care when carrying out functions in relation to their company. The standard of care required is the care that would be taken by a reasonably diligent person having both: the general knowledge, skill and experience that may reasonably be expected from a person carrying out the same functions as are carried out by that director in relation to the company (an objective test) the general knowledge, skill and experience that that director has (a subjective test) Directors are under a duty to acquire and maintain a sufficient knowledge and understanding of their company’s business to enable them properly to discharge their duties as directors. Nominee Directors In reality there is no such concept as a nominee director. Being appointed a director carries with it serious responsibility. A director must take those responsibilities seriously, we do at ILS. For more information please contact our Fiduciary Services Manager Teresa Mee.